FIVE KEY ISSUES AFFECTING THE SUPPLY CHAIN – OUR OPINION.

There is no doubt that the current day supply chain has never been so challenging.

Customers have never had so much choice.

Margins are being eroded as supply costs, including transport, labour and raw materials dramatically increase. In addition, the supply chain itself is becoming more complex, especially with the development of multiple purchase channels.

As a supplier of both ex-stock and bespoke products to the trade, in this blog, we consider the five key issue we believe are currently affecting supply chain managers.

Costs

Ever increasing operating costs must be high on everyone’s agenda.

Despite greater investment in eco – efficient heating systems and switching to more cost –effective utility providers, constantly rising energy prices are, undoubtedly, having a major impact on Business today.

Couple this with an overall increase in the cost of transportation, especially with the ever-expanding globalisation of the customer base, the continual renewal and replacement of new technology and the incremental hike of labour costs and managers soon move into survival mode.

We know, from talking with our customers, that, for many, they are already cutting costs to the bone while others are looking at reconfiguring their supply chain in an effort to increase financial efficiency.

It would also seem that, many of them are now moving away from cost plus or break-even pricing towards a more Value based pricing strategy.

They believe that supply chain management should not be driven solely by cost but should be based on incremental margin costing, where indirect costs and factors such as enhanced customer service and extended warranties add value to the complete service package.

Staff

Our customers continually tell us that one of their key issues is finding suitable skilled ‘talent’, especially in the field of supply chain management. Long serving executives who have the time-served knowledge and skill sets to deal with the complexities of the role are retiring from full time employment and are not easily replaced.

Recently, one of our customers was also bemoaning the problem of staff retention. They said that, young recruits especially of the millennial generation are more likely to ‘job hop’ than the ‘baby boomer’ generation. We know, this issue is not exclusive to supply chain management but as our customer told us, trying to find suitable people who have people skills, fully understand profit and loss and have a strategic viewpoint is a major challenge.

This will inevitably have an impact on the efficiency of a company’s supply chain

Resources / Supplier relationships

One of the consequences of the government’s emphasis on financial austerity has been business downsizing. This means, for many businesses, capacity and resources are being stretched as new opportunities arise.

This is especially relevant in the manufacturing sector, where obsolete equipment has not been replaced and outsourcing has become the norm. This is fine during ‘slack’ periods but as the economy picks up and globalisation accelerates, many companies are now finding that their current infrastructure is inadequate for responding to continuing growth.

As one of our customer’s told us, ‘over the years, we created a supply chain that reflected our trading situation but as our sales start to improve so does everyone else’s and therefore lead times become extended and customer service becomes strained’

This, to us, means a re-thinking of the supply chain to meet the demands of the next decade. There is no doubt, in 2020, customer demands will continue to rise in line with increased expectations – fuelled largely by social media, routes to market will become more complex – post Brexit and supply costs will, undoubtedly, continue to rise.

As the market place becomes more complex, it seems more important than ever to strengthen the supplier / customer partnership. Costs can be driven down by simplifying the supply chain process. For example, reducing warehouse space by taking advantage of suppliers, such as ourselves, who can despatch many of our product lines within a few days of ordering.

Compliance

Another major consideration especially post – Brexit.

There is no doubt; keeping up with the ever-changing regulations is a never-ending challenge. And it looks like it’s going to get worse rather than better over the next few years.

Trading conditions are difficult enough without the complexity of new legislation and regulations that will, undoubtedly, escalate over the next few months. It’s ok for governments to talk the talk, but do they really understand the everyday issues that affect most businesses today?

This is especially relevant for those businesses, like us, that have high safety considerations and therefore, stringent regulations attached.

And not necessarily only applicable to the UK.

Threats / Challenges

Finally, what are the threats and challenges facing the current supply chain?

Did I hear someone say, ‘where do we start?’

As we have seen with the ‘stockpiling’ of essential products due to Brexit, there is anxiety with the sustainability of many current supply chains. This means, continuity planning is now becoming the number one priority for most Buyers. This especially important when downsizing is taking place. It is also a concern when entering new markets as business reputation is on the line should stock not be available as promised.

And it’s the supply chain network that will take the brunt of such an issue.

This includes everything from supply delays or shortages, problems with product safety, as we have seen recently with Whirlpool and Vauxhall and new regulations and trade controls that are constantly changing.

Understandably, Buyers and managers are increasingly consolidating their supply chain and working with suppliers to implement systems that help create consistency, cost savings and sustainability.

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